ATO outlines cryptocurrency plans for tax time

‘We will take strong action’: cryptocurrency comes under review

Ahead of its surveillance and compliance activity for tax time 2018 the tax office is “strongly encouraging” taxpayers to review cryptocurrency guidance.

The term cryptocurrency is generally used to describe a digital asset in which encryption techniques are used to regulate the generation of additional units and verify transactions on the blockchain. Cryptocurrency generally operates independently of a central bank, central authority or government.

The misunderstanding of tax consequences of cryptocurrency is inviting the attention of non-sophisticated investors and otherwise conservative clients, which is likely to attract further guidance and intense surveillance from the regulators. Part of the problem is the false legitimacy enmeshed in the use of the word ‘currency’.

This fraudulence is particularly concerning for those who don’t understand that cryptocurrencies with characteristics similar to bitcoin (BTC) are an asset for capital gains tax (CGT) purposes.

Compliance

The ATO has released a guidance paper on cryptocurrency that confirms that BTC, in particular, is neither money or foreign currency. Therefore; any comparison between cryptocurrencies and the dollar, euro or pound should be redundant. At best, cryptocurrency should be commonly known as a crypto asset, based on how it comes to be.

‘The tax office is also set to receive data from financial intelligence agency AUSTRAC. Recent changes to the Anti-Money Laundering Counter-Terrorism Financing Act, spearheaded by AUSTRAC, are designed to provide the ATO with data which identifies participants in the market and income that may be subject to capital gains’ – (Source: Accountant’s Daily, 22/01/2018).

Further, the ATO said it would continue to review and update its guidance related to cryptocurrency. We can help.